What exactly are general liability and professional liability premiums based on?


It depends on what is the more sensible way to measure the level of risk you face. This may vary from one insurance company to another. The most common bases for general liability and professional liability premiums would be:

  • Gross sales
  • Total Payroll
  • Ticket sales
  • Square footage of your business premises

How your general liability and professional liability premiums are computed may also depend on the nature of your business.

The concern with general liability is the liability the business has for every contact it has with its customers and the general public through its products or services, its business premises or its advertising campaigns. The insurance company will try to measure the risk by looking at the risk with regards to:

  • The products - how they are delivered, what is the potential for liability with the products, the range of products being sold or services rendered
  • The office or business site - whether there is high foot-traffic in the business premises, whether people can freely enter the business premises (such as a restaurant)
  • The advertising campaign - how wide the campaign will reach, what kind of claims are being made

Meanwhile, the concern with professional liability insurance would be to protect the professional or the company against lawsuits resulting from errors or omissions made that resulted in financial loss for the client. Thus, the insurance company will see the extent of risk involved with respect to the size of clients they have or the amount of funds they handle for clients.

Looking at this, you can say that depending on the type of company you have, the basis for general liability and professional liability insurance may be different. You should ask your insurance agent what they use as basis for computing premiums.

Liability Premiums Computation

When the basis is determined (gross payroll, gross sales, etc.), the premiums are computed by multiplying this amount by a dollar amount.

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